Bill Gross, chief investment officer of the world’s largest bond fund today told CNBC that:
Subprime credit crisis will only worsen over the next two years, Credit markets face another $250 billion in loan defaults and delinquencies for the remainder of 2007 and throughout 2008, Mr. Gross of Pacific Investment Management, or Pimco, told CNBC.
Major banks that wrote down billions of dollars in the third quarter — namely Citigroup, Merrill Lynch and Bear Stearns — will suffer additional losses after issuing “garbage loans” they couldn’t guarantee to consumers who couldn’t afford them, according to CNBC.
He says that the Fed will have to lower mortgage interest rates to avoid further loan defaults. He predicts the 30 year mortgage will be targeted to be 5% interest.
In the obvious statement of the year award he says:
“The Fed is in a corner here,they do have to fight inflation, but they do have to fight asset deflation in terms of housing.”
More talk from CNBC on the state of the Subprime mess.
Gross from April. Notice the prediction of how much prices need to come down at various Basis Point drops.
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